NFTs are all the rage among aficionados of cryptocurrency and collectors alike, not to mention those who like to try their luck on the cutting edge of tech.
However, as with all things new, there’s a risk with NFTs, one that can turn the cutting edge into the bleeding edge
What Are NFTs?
Non-fungible tokens are a type of asset that exists purely in digital form. Like cryptocurrency—to which it’s pretty closely related, something we go into in our full explainer on NFTs—record of ownership is kept in a blockchain and a digital ledger.
Unlike cryptocurrency, though, NFTs are one of a kind: non-fungible means that they’re not interchangeable with each other.
This makes each and every NFT unique, in contrast to cryptocurrencies where each unit or coin can be exchanged for another—much the same goes for real-world currencies, too.
Because an NFT is unique, it makes them a poor mode of exchange: the power in currencies lies in the fact that any one can be exchanged for any other one of the same kind.
If you have two one-dollar notes in your pocket and you buy a pack of gum that costs $1, you can pay for it with either note, it’s not like the store clerk is going to refuse one but accept the other.
What makes NFTs unattractive as currency makes them very interesting for collectors, though.
After all, if something is one of a kind, there is bound to be somebody that wants to own it. It doesn’t matter if it’s a rare coin or even a limited-edition boxed set of a popular video game: rarity can make anything worth coveting.
“Owning” an NFT
However, NFTs have a weird quirk: they aren’t owned outright.
For instance, if you shelled out $8 million for the world’s rarest stamp, you’d own the tiny piece of paper. It’d be in a temperature-controlled glass case in the library of the massive mansion we assume millionaire collectors own.
This stands in sharp contrast to NFTs, which aren’t owned. For example, Malaysian businessman Sina Estavi bought Twitter founder Jack Dorsey’s very first tweet for almost $3 million.
Here’s a copy of that tweet.
Now, it’s not like How-To Geek had a couple million bucks laying around and bought the tweet from Mr. Estavi, or even licensed it from him.
We just copied the tweet and then uploaded it to our own site. You could do the same: just right-click, hit “Save Image,” and you’re the proud owner of a poorly spelled tweet. You wouldn’t be breaking any laws or anything.
This is because Mr. Estavi doesn’t actually own the tweet, he owns a certificate of authenticity that states he is the owner of the tweet.
In real-world terms, it’s like buying the deed for a house but not the house itself—and you paid the same for the deed as for the house.
Technically, NFTs arer protected under copyright. Harry Richt, a lawyer based in New York City, told us via email that “by default, the author of an NFT retains all the exclusive rights, including the right to create copies of the work […] the purchaser of the NFT gains the right to display or sell that particular NFT.”
According to Mr. Richt, the author also has the right to go after people that infringe on that copyright.
Another lawyer we spoke to, Max Dilendorf, also from New York, said much the same, though emphasized in particular that the intellectual ownership of NFTs is “a contractual question, depending on the platform” you buy the NFT from.
Different platforms have different rules regarding copyright.